Bank of Tanzania

Investors appetite and confidence on government securities are gradually picking up as reflected in the outcome of the Bank of Tanzania’s (BoT) recent auctions.

For example, the five-year fixed Treasury bond auction on Wednesday this week was oversubscribed by 54.14bn/- against the 25bn/- that the central bank sought. Likewise, twelve month treasury bills auction last week was oversubscribed by 69.29bn/-.

Analysts attribute the oversubscription to the easing of liquidity stance with overnight rates decreasing from record high in the months of December 2011 and early January this year. “It remains to be seen as a positive sentiment. We expect the over subscription and cut-off at 18 per cent. Most trading books are expected to be targeting the five-year bond to add on some risk,” projected the Standard Chartered Bank in its daily commentary ahead of the auction.

According to the report, the secondary market was as well expected to start picking up. Similarly, the completion of tax obligations by most key players in government securities explains reason for the oversubscription. Over 60 per cent of the key players of long term maturities are commercial banks, with only five per cent as retail investors. Others are pension funds, insurance companies and a few micro-finance institutions.

According to the BoT Treasury Bonds Auction Summary, yield to maturity was set at 17.05 per cent with the bank accepting 25bn/- as successful amount despite the oversubscription. In the last half of 2011, the central bank cancelled several bonds auctions including; the two for seven years and one for two-years–over disagreement with bidding investors who offered low coupon rates while a number of bonds had been undersubscribed.

Source Tanzania Daily News

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